Manage the risks of importing
Avoid payment problems with imports
If you pay for imports in advance, you risk finding that the goods never turn up, or are faulty. Recovering your money or getting compensation can be very time consuming and expensive, and may even prove impossible.
You can protect yourself by using suitable payment terms. Within the EU it is not uncommon to ask suppliers to offer you credit - in the same way as you ask for credit from your UK suppliers.
Suppliers may prefer you to use a documentary collection. This payment method helps protect them if you fail to pay after delivery. Your bank can advise you on what is involved.
In a few cases, the supplier may want you to use a letter of credit. A letter of credit is a guarantee from your bank that they will pay the money owed to the supplier on the production of specified documents. This can be complex and care should be taken in using them.
Different payment terms also affect the timing of payments. For example, payment might be required at sight - ie as soon as you have received evidence that the goods have been shipped, before they even reach the UK. Before agreeing a contract, you should check the effect on your cashflow.
However you are paying, it's important to know exactly what costs you and your supplier are each responsible for. These typically include shipping (or air freight) to the UK, UK import duties and taxes, onwards delivery to your premises and bank charges for international payments.
You should agree a clear contract. A good relationship with your supplier also helps. Read more about managing overseas suppliers.
Bear in mind that some costs may fluctuate. For example, import duties could change. If you are dealing in a foreign currency, the exchange rate also varies. Read more about how to manage foreign exchange risk for imports.