Importing from China: what you need to know

For many local importers, the People’s Republic of China is a popular choice for sourcing goods.

Given China’s advanced manufacturing capabilities and competitive pricing, it’s understandable why it’s been Australia’s number one source of imports from 2009-2020. And while the pandemic has created some challenges for Australians importing from China, there are still many advantages for local businesses seeking to source goods from the country.

To help your company successfully navigate the process, here’s our guide to importing from China to Australia. It covers everything from taxes to the current state of trade relations.

According to a recent report from AMP Capital, “China has been Australia’s largest two-way trade partner” since 2009. During this period, Australian exports to China represented 41% of total exports, and 32% of all Australian imports were from China. 

Currently, two-way trade with China is worth more than $246 billion a year. In 2018, a PwC Australia report stated that two-way trade with China was more than 2.5 times that of Australia’s next largest two-way trade partners, Japan and the US. 

What’s more, according to the PwC report, “Australia has not had a trade relationship of this significance since the 1950s, when the United Kingdom was our major trading partner”. 

So when political relations between the two countries deteriorated in 2020, it was understandable that concerns about potential trade impacts would increase.

Initially, the friction stemmed from Australia supporting “a call for a global inquiry into China’s handling of its initial Covid-19 outbreak.” In response, China introduced trade restrictions on several Aussie exports such as lobster, barley, beef, wine, cotton and coal. 

However, despite the tensions, AMP Capital reported that the impacts on the Australian economy were mild, and most sectors found alternative export markets. And, as it turns out, 2020 still ended up being a massive year for Australian trade with China. 

In a recent Journal of World Trade article, the researchers highlighted that in 2020:

While trade tensions are ongoing, the Australian government is under pressure to stay committed to a strong trade relationship with China from sources as diverse as:

• Australian business groups
• universities 
• think-tanks

The China-Australia Free Trade Agreement (ChAFTA) came into effect in mid-December 2015. Some of its key elements include:

• Tariff reductions: before the free trade agreement (FTA), Australian exporters had a competitive disadvantage. They had to pay significant tariffs that other countries with existing FTAs with China, such as Chile, didn’t have to pay.

After ChAFTA, China eliminated or rapidly reduced tariffs on several key Australian exports.

Meanwhile, Australia completely eliminated tariffs on Chinese imports into Australia. However, you do need to follow some procedures to take advantage of preferential ChAFTA tariff treatment. We’ll go through these in more detail in the guide below.

• Most favoured nation clause: this clause means that Australian businesses get access to the same trade terms that other trading partners receive in FTAs with China.
• Foreign investment screening threshold increases: these increase the threshold allowed for potential Chinese investment into certain non-sensitive sectors.

Navigating your way through the importing process can be confusing. For example, you might wonder if you have to pay import tax from China and if so, how much this import tax is?

To help make it easier, our guide below has all the answers you’ll need to successfully import goods from China.

Firstly, it’s helpful to know that you can import many goods which don’t need a formal import declaration and are free of taxes and charges. In general, these goods tend to be:

• low value
• software downloaded from overseas websites
• most personal effects

But it gets more complicated if goods:

• are over $1,000 in value
• are prohibited or restricted items (you can check the list of prohibited goods here)
• represent a biosecurity risk
• require payment of duty and taxes.

Let’s explore in more detail what you need to know to import higher-value goods, which will of course be more relevant to most Australian business importers.

When your goods arrive in Australia, they’ll need to clear customs, which is run by the Australian Border Force (ABF). To clear customs, all arriving goods require a declaration, unless you have an exemption. 

Additionally, goods may need to go through checks for:

• biosecurity
• food safety 
• drug control requirements. 

You might also need a licence or a permit for some goods. 

Currently, the ABF website states that “there is no requirement for importers (companies or individuals) to hold an import licence to import goods into Australia.”

However, for biosecurity reasons, some goods require a permit to be imported (see next section).

To mitigate biosecurity risks, some goods need an import permit from the Department of Agriculture, Water and the Environment (DAWE). DAWE operates a system called the Biosecurity Import Conditions system (BICON). 

BICON outlines whether your goods need a permit. You can apply, track and manage your BICON import permits online with a registered account. 

As an importer, you’re responsible for ensuring that goods imported from China into Australia comply “with all mandatory product safety standards, labelling, lab testing, and certification requirements.”

Additionally, you need to ensure that the goods you import don’t infringe:

• copyright
• trademarks
• protected Olympic expressions
• IP relating to major sporting events indicia and images. 

Certain goods need a trade description, which must be a true description of the goods in English. You may also need to show information about the country of origin for certain food products. 

Find more information on the specific requirements for trade description compliance and product labelling on the ABF website. 

Once you’ve covered all the key documentation requirements, it’s time to check some of the costs involved in importing goods from China.

If you need an import permit, the lodgement fee is $120. The assessment fee can then vary between $60 and $480, depending on the category of your goods.

If DAWE needs to inspect your goods for biosecurity and quarantining purposes, additional fees will apply. 

Generally, they charge these in 15-minute increments. DAWE recommends providing all the required documents with your goods to reduce the likelihood of needing an inspection. 

The ABF also applies an import processing charge that varies depending on:

• the value of your goods
• whether you submit paperwork electronically or use hardcopies

Goods and Services Tax (GST)

Irrespective of whether you’re registered for GST or not, GST is payable on most imported goods. That said, there are some exemptions that you can check on the ABF website.

The GST rate for imports is 10% of the value of the ‘taxable importation’, which is the total of:

• the customs value (CV) of the imported goods
• any duty payable
• the amount paid or payable to transport the goods to Australia and insure the goods for that transport (T&I)
• any Wine Equalisation Tax (WET) payable, if applicable

Generally, the free on board (FOB) value of the goods is taken to be the customs value. FOB is, “the value of the goods excluding overseas transport and insurance”. However, certain charges can be excluded or included in the CV. 

Detailed information on how the ABF calculates customs value is available on their website. 

It’s also important to note that customs value is expressed in Australian dollars, “at the rate of exchange prevailing on the day of export of the goods (not on the day the goods arrive in Australia).”

Finally, GST credits and deferrals may apply in some circumstances.

The Australian Taxation Office website has more details. 

If you import goods into Australia at a lower price than is charged in the manufacturing country, you may have to pay dumping and countervailing duties. You can check the Anti-Dumping Commission’s Dumping Commodity Register to check whether your goods are subject to the anti-dumping measures and any applicable rates. 

A licensed customs broker can navigate the complexities of clearing customs on your behalf. However, brokerage fees vary between agents, so it’s worth getting quotes from different providers.

While our country’s trade with China heads into unknown territory, it’s important to be aware that Australia also signed a free trade agreement with India in April 2022. The historic Australia-India Economic Cooperation and Trade Agreement will help:

• make Australian exports to India cheaper, and 
• create new import opportunities for Australian businesses

According to the Department of Foreign Affairs and Trade (DFAT), the agreement will immediately eliminate tariffs on over 85% of Australian goods exported to India. Then, over the next 10 years, this figure will rise to 90% of tariffs. DFAT estimates that this will be “commercially significant for up to $14.8 billion worth of Australian merchandise trade destined for the Indian market each year.”

In return, the Australia-India trade agreement will also allow around 96% of Indian imports to enter Australia duty-free.

As background, India is one of the world’s largest democracies whilst also being one of the fastest-growing major economies. National GDP in India is projected to grow at 9% in both 2021-22 and 2022-23, and 7.1% in 2023-24. Additionally, India was Australia’s:

• seventh-largest trading partner in 2020, with two-way trade valued at $24.3 billion, and 
• sixth-largest goods and services export market, valued at $16.9 billion. 

The latest advancement in Australia-India trade relations will support the Government’s goal of lifting India into our top three export markets by 2035. It will also make India the third-largest Asian destination for outward Australian investment.

The unpredictability of recent years has curbed international travel while creating shipping delays, lengthier quarantine times and delayed payments. As a result, many importers have experienced significant cash flow pressures and greater risks in supply chain management.

Here’s how Octet can help.

Octet’s Trade Finance facility can help to smooth out the cash flow curves in your business. It gives your business the power to bridge cash flow gaps by providing:

• a convenient revolving line of credit, with up to 60 days’ interest-free and up to 120 day repayment terms
• security-free funding and payment options – with funds based on the strength of your business’s balance sheet, so there is no need for personal or director security
• increased purchasing power to fund your business growth
• the ability to pay international suppliers instantly while enjoying flexible repayment terms
• a way to take advantage of any early settlement discounts your supplier may offer, saving you money on imported goods

While importing and exporting always carry an element of risk, the right financial management and tools can help your business increase security and trust with international suppliers. 

One such tool is Octet’s Supply Chain Platform. It verifies and manages approvals for all transactions for suppliers and importers using the platform.

As a buyer, this means you get peace of mind that we’ve taken responsibility for onboarding and verifying every supplier. We have a team on the ground in Shanghai that can:

• meet with your suppliers
• do background checks 
• verify that they have all the relevant trade documentation

What’s more, our Supply Chain Management tool supports Chinese, so you and your Chinese suppliers can each interact in your preferred languages. 

Explore our Trade Finance solution to move goods from China and abroad with smoother, simpler and more secure importing — without tying up working capital.